The impact of covid – 19 pandemic to vietnamese economic

MINISTRY OF EDUCATION AND TRAINING DA NANG UNIVERSITY OF ECONOMICS REPORT INTRODUCTION TO BUSINESS The Impact of Covid – 19 Pandemic on Vietnam Economy in the last two years Lecturer Nguyễn Sơn Tùng Class 46K01 1 Group 1 Da Nang, 6th March, 2022 Abstract The breakout of the COVID 19 pandemic has been a disaster on a massive scale The major strategy for avoiding COVID 19 transmission has been to distance society, which has resulted in economic stagnation Vietnam is no exception Vietnam, however,.

MINISTRY OF EDUCATION AND TRAINING

DA NANG UNIVERSITY OF ECONOMICS



REPORT INTRODUCTION TO BUSINESS

The Impact of Covid – 19 Pandemic

on Vietnam Economy in the last two years

Da Nang, 6 th March, 2022

The COVID-19 epidemic has protracted as a far-reaching crisis, threatening health, disruptingeconomic activities and damaging people's lives around the world, forcing countries to sealtheir borders and impose social distancing to fight the epidemic The coronavirus had wreakedhavoc on the company's supply chains and hit personnel in crucial industries The long-running COVID-19 epidemic in Vietnam has also hampered the country's economic recovery.The pandemic prevents workers from returning to work and increases operational pressuresfor business A series of companies were forced to close However, Vietnam's markets remainrobust, and the country's economy appears to be sturdy enough to weather the recentproduction disruptions brought on by the pandemic Moreover, besides the negative effects,there are many companies still surviving well amid the pandemic This paper aims to bringout the general picture of Vietnam’s economy during Covid 19

in the world GDP in 2021 dropped by 0.33% compared to 2020, reaching 2.58% - the lowestrate in the period 2011-2021 [CITATION Placeholder1 \l 1033 ] For the first time since

2000, Vietnam recorded a quarter of negative growth rate Two of the three main pillars construction and services industries, had been "hit" heavily That was the result of productionactivities stalled, supply chain disruptions and purchasing power plummeting because ofsocial distancing orders in many localities

-Figure 1: Growth rate of Vietnam during the period 2011-2021

20110 2012 2013 2014 2015 2016 2017 2018 2019 2020 20211

Source: General Statistics Office of Vietnam

Figure 2: Comparing the GDP growth rate of Vietnam and other countries

Source: General Statistics Office of Vietnam

1.2 GDP by sectors in 2020

In terms of the economic structure of Vietnam in 2020, the agriculture, forestry and fisherysector accounted for 14.85% of the whole economy; industry and construction made up33.72%, service sector contributed 41.63% and product tax minus product subsidiesaccounted for 9.8% [CITATION Placeholder2 \l 1066 ]

The agriculture, forestry and fishery sector increased by 2.68%, contributing 13.5% to theoverall economy's total value added growth rate This sector had faced many difficulties due

to the impact of drought, saltwater intrusion and floods Moreover, the unpredictable andcomplicated development of the Covid-19 epidemic has affected the export, import andconsumption of agricultural products

Meanwhile, the industry and construction sector increased by 3.98%, contributing the most tothe economy’s value added growth rate (53%) This was owing to the fact that Covid-19epidemic was well controlled in the country, and the Vietnam-EU Free Trade Agreement(EVFTA) was implemented As a result, industrial production in the fourth quarter of 2020had prospered In addition, the processing and manufacturing industries play a key role indriving the overall growth of the sector and the whole economy

Service sector increased by 2.34%, contributing 33.5% to the growth rate of total added value.This was the lowest growth rate during the period 2011-2020 because the Covid-19 outbreakhad significant impacts on commercial and service activities

Figure 3: GDP by sectors in 2020

Agricultural - forestry-fishery;

14.85%

Services; 41.63%

Industry and construction;

37.86%, service sector contributed 40.95% and product tax minus product subsidiesaccounted for 8.83%.

Figure 4: GDP structure in 2021and sector growth Y-O-Y

Source: General Statistics Office of Vietnam

Specifically, the agricultural, forestry, and fishing sector increased by 2.9% and contributed13.97% to the overall economy's total value-added growth rate, which was higher than in

2020 (2,68%, contributed 13,5%)

The industrial and construction sector increased by 4.05%, contributing 63.80%, a higherpercentage than in 2020 (3,98% contributed 53%) In the context of the globe and Vietnambeing heavily affected by the covid-19 epidemic, the growth of the industry is a bright light,contributing positively to the total growth of the economy in 2021 In the industry andconstruction sector, the processing and manufacturing industry remained the growth engine ofthe whole economy, increasing by nearly 6.8% and contributing 1.61 percentage points to theoverall growth rate

The service sector rose by 1.22%, contributing 22.23% lower than 2020 The wholesale andretail industry fell by 0.21%over the previous year, lowering the growth rate of the total addedvalue of the entire economy by 0.02 percentage points The Covid-19 epidemic's convoluted

progression has had a significant impact on commercial and service activities because of theemergence of new strains of coronavirus (Omicron) Negative growth in several serviceindustries accounted for a major amount of the decline in the service sector's and economy'soverall growth rates.

2 Balance Trade

2.1 Balance trade in 2020

In the context that the covid-19 pandemic was so complicated and showed no signs ofstopping, import-export activities in particular and economic recovery in general hadencountered numerous challenges However, the total import and export turnover of productsstill maintained a high growth rate

In 2020, the total import-export turnover of goods was estimated at $543.9 billion, up 5.1%compared to the previous year, of which the export turnover of goods reached 281.5 billionUSD, an increase 6.5%; goods import reached 262.4 billion USD, up 3.6% The balance oftrade in goods in 2020 was estimated to have a trade surplus of 19.1 billion USD, the largesttrade surplus ever This was partly attributable to the Free Trade Agreements, which hadbrought positive signals to the Vietnam economy, especially the Free Trade Agreementbetween Vietnam and the EU (EVFTA) In 2020, exports to the EU reached $34.8 billion;notably, after 5 months of implementation (from August 1st , 2020), Viet Nam's total exportturnover to the EU reached 15.4 billion USD, up 1.6% over the same period last year Thisreflected the high growth of domestic production capacity, favorable investment, productionand business environment, and the success of Vietnam international economic integrationprocess This is an encouraging result in the context of a serious economic decline in the EUregion and continues to face the convoluted Covid-19 pandemic

Figure 5: Vietnam balance trade 2016-2021

2.2 Balance trade in 2021

In general, the country's total import-export value in 2021 was $668.55 billion, up 22.6%from the previous year and equivalent to an increase of $123.23 billion The trade balance ofgoods is estimated to have a trade surplus of $4 billion

Figure 6: Import-export revenue over years (billion USD)

Source: General Statistics Office of Vietnam

2.2.1 Export

In 2021, total export value increased 19 percent to $336.25 billion, equating to a $53.68billion rise over the same period last year In terms of the export structure, fishery productsaccounted for 2.6%, reaching $8.89 billion; agro-forestry products made up 7.1%, touching

$23.76 billion; fuels and minerals contributed 1.1% and processing industry accounted for89.2% These bright figures were acquired thanks to the fact that the government anddomestic businesses have effectively exploited trade promotion on digital platforms Besides,the global supply chain gradually recovering after the epidemic, and the demand of marketsincreasing again were also the main driving forces behind export growth

Figure 7: Export structure (billion USD)

Exports to markets with which Vietnam has FTAs grew rapidly (3.1 percent), such as China(15%), the United States (24.2%), the European Union (14%), ASEAN (25.8%), the Republic

of Korea (RoK) (15.8%), India (21%), New Zealand (42.5%), and Australia (42.5%) With anestimated turnover of $95.6 billion, the United States was Vietnam's largest export market forsuch products as electronics, garments, and smartphones

2.2.2 Import

In terms of imports in 2021, the total import value reached $332.25 billion, up 26.5%compared to 2020 In terms of the export structure, consumer goods accounted for 6.5% whileproduction material made up 93.5% In particular, machinery and equipment, computers,electronic products, phones, and components grew by $25.3 billion; iron and steel products,

scrap, iron and steel products, other common metals and products grew by $8.12 billion; andagricultural products grew by $5.57 billion.

China was Vietnam's largest import market with an anticipated turnover of 109.9 billiondollars

Figure 8: Import structure (billion USD)

Source: General Statistics Office of Vietnam

Source: General Statistics Office (GSO

Figure 10: Causes of rising CPI

Source: General Statistics Office (GSO)

In 2021, CPI increased by 1.84% over the previous year, the lowest increase since 2016 Lowinflation, notwithstanding increases in food and essential commodities costs owing to Covid-

19 limits, is a negative rather than a positive sign, indicating a lack of aggregate demand andeconomic activity It may also result in low inflation forecasts in the months ahead In Ho ChiMinh City, for example, activities in retail and recreation venues, parks, workplaces, andtransit stations decreased by 85 to 90% in July 2021 compared to the base period of 3 January

to 6 February 2020 Due to the fact that Ho Chi Minh City is Vietnam's most importanteconomic hub, this crisis will have serious and long-term consequences for the country'seconomy

The low consumer price index was partly attributable to poor purchasing power, and schooltuition fee exemptions/reductions as a result of the prolonged COVID-19 pandemic Peoplehave been compelled to stay at home, resulting in a 21.15 percent drop in plane tickets and a2.32 percent drop in vacation packages

Rising gasoline costs were the primary cause of the CPI's rise Petrol prices alone climbed by31.74%, causing CPI to increase by 1.14 percentage points Besides, the gas price increased

by 25.89%, making the overall CPI increase by 0.38 percentage points Thus, the fluctuation

of crude oil price alone made CPI increase by 1.52% of the total increase of 1.84% Theabove figures have shown that petrol has a huge impact on inflation

In addition, according to the General Statistics Office, rice and construction materials pricesclimbed by 5.79% and 7.03%, respectively, leading to a 1.84% increase in the consumer priceindex Moreover, the rise in raw material prices triggered a chain reaction, causing manymanufacturers and restaurants to stand still, especially given that company activity has onlyrecently resumed after a four-month hiatus Meanwhile, food prices fell 0.54 percent year

over year, with pork prices falling 10.52 percent, resulting in a 0.12 percentage point decline

in the total CPI

4 Unemployment rate

In 2021, the rate of job loss and business closures is at a record high More than 1.7 millionpeople of working age were unemployed in the third quarter, an increase of half a millioncompared to the previous quarter The unemployment rate reached 3.98%, the highest in adecade There were 12 million people having their hours cut; 18.9 million people lost theirincome

Losing jobs, running out of money while there are still many other pressures such as payingrent, worrying about epidemics , millions of workers have found ways, from motorbikes,bicycles, even walking, to return home as soon as the social distancing order is eased Sincethen, an unprecedented large-scale migration wave has emerged

Figure 11: Unemployment rate of Vietnam during the period 2012-2020

Source: tradingeconomics.com/General statistics office of Vietnam

II Industries that are hit hard amid COVID-19

According to the General Statistics Office of Vietnam (GSO), in 2020, international visitors

to Vietnam only reached 3.8 million arrivals, down 78.7% as compared to 2019 Domestictourists only reached 56 million arrivals, down 34.1% as compared to 2019 and only 68.29%

compared to the target of 82 million domestic visitors; total tourism receipts were around

$13.8 billion, decreased by 58.7%

The impact of COVID-19 on the tourism industry in Vietnam is presently a main concern, due

to the fact the crisis has entailed a wide range of economic downturn and profoundconsequences at the livelihood of citizens The impact of the COVID-19 crisis has led to adomino effect in different areas of the local tourism system The waves of COVID-19 have hitall local businesses, especially small and medium-sized businesses with limited financialcapacity

However, since October 2021, Vietnam has changed its policy from "zero-COVID" to "newnormal" Restaurants and recreational establishments are allowed to reopen and offer dine-inservice This is expected to revitalize the tourism industry of the country

2 Aviation Industry

The COVID-19 pandemic has hit the aviation industry around the world Borders closures,social lockdowns and travel restrictions have been imposed by the government to slow thespread of the virus Many countries with regional integration policies have temporarilyresumed border control practices, which have helped to stall the aviation industry

[ CITATION Law22 \l 1033 ] The pandemic was the biggest crisis ever for theinternational aviation industry (Jenkins, 2020) Border closures and blockades by manycountries have significantly reduced travel demand To cope with the situation, many airlineshave been released to cancel the flight, the grounded plane and survive the staff

Vietnamese airlines also are facing accumulated difficulties Damage to Vietnam’s aviationindustry due to the Covid-19 epidemic was very serious, and the number of passengers andgoods has also decreased sharply Generally for 9 months, passengers carried by airwayreached 22.5 million passengers, a decrease of 45.5% over the same period last year andpassengers traffic gained 25.4 billion passengers-km, a decline of 55.9%; freight carriedreached 196.6 million tons, down 39.4% compared to the similar period last year and freighttraffic gained 2.6 billion tons-km, down 54.2% Due to the limited operation of the flights, theairline’s revenue fell sharply, and the airline is facing a high risk of bankruptcy because theycan not cover the large costs to maintain operations

Figure 12: Number of flights by domestic airlines in 11 months in 2021

Source: General Statistics Office (GSO)

The short-term debt of three main airlines, Vietnam Airlines, VietJet Air, and BambooAirways, was projected to reach US $1.56 billion by June 2021, and there had been promptingcalls for the industry to be bailed out

However, in the context of the well-controlled of Covid-19 epidemic in Viet Nam as well assome countries around the world, airlines announce to re-open and increase the frequency ofdomestic flights, restore some international commercial routes to meet the needs ofpassengers, contributing to connecting trade and maintaining production and businessactivities This is a positive signal which shows that the aviation industry is graduallyrecovering

III Industries have outperformed amid COVID-19

The pandemic has wreaked havoc on economies all across the world, but it has also opened upnew opportunities for particular industries, with several businesses in the country prospering.It's critical to comprehend the reasons why certain industries have succeeded so wellcompared to others

1 Technology industry

1.1 Digital transformation

While COVID-19 has wreaked enormous damage on society and economy, it has alsoprovided us with a look into the future - one in which digital has become crucial to allinteractions, social and economic In Vietnam, the pandemic as well as prolonged lockdowns